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Why the Agent Won’t Reveal the Likely Price Ahead of the Auction

Buyers can find it very
frustrating when they ask an agent what a house at auction will likely sell for
and the agent refuses.

All they want to know is whether
they should consider attending the auction and doing their due diligence on the
property. But the Property Occupations Act prohibits agents revealing price
estimates for properties going to auction.

However, an agent can still
give buyers what’s called a comparative market analysis (CMA), provided the
seller agrees, which will list similar properties in the area that have sold in
the past six months and the price they sold for. This gives buyers an idea of
what the market is doing and how the upcoming auction is likely to go.

The legislation also allows
agents to list properties online by price. So when consumers (the vast majority
of whom begin their property search online) filter their search results by
price, the property to be auctioned will show up in those results, giving
consumers an idea of the price bracket that the property sits within.

What’s underquoting?

One of the biggest problems
faced in southern states is the issue of underquoting, where an agent will tell
a prospective buyer that a house will likely sell under the hammer for the low
figure of $x, but it actually goes for three times $x.

Agents potentially engage in
this practice to get people to attend the auction and show the vendor, their
client, that there is significant interest in the property and that the
expensive marketing campaign has been a success.

Why is underquoting bad?

Firstly, it’s very dispiriting
and expensive, as a buyer, to go to the cost of getting building and pest
inspections done, valuations done, and loans approved – only to be priced out
of the market at the opening bid.

Secondly, there’s a risk that
some buyers can get so frustrated and get swept up in the bidding, ultimately
bidding more than they can afford.

Thirdly, it’s frustrating for the auctioneer who sees many
interested parties, but when the opening bid prices most of those people out of
the process, they’re left with only one or two bidders – or zero!

Finally, this presents an
inaccurate picture to the vendor of the level of interest from the market in
their property and the price they have set.

Queensland leads the way

The Property Occupations Act has been successful in
Queensland. We don’t face the same issues of underquoting here that other
states face and it is largely attributed to our legislation. In fact, it has
been so successful here that other states are considering implementing similar
measures that would achieve the same thing.